OIL INDUSTRY'S PRO-CLIMATE AGENDA: FIFTY SHADES OF GREEN.

• Author: Gupta, Shraddha

Over the past two decades the oil and gas industry (or "fossil fuel" industry) has appeared to embrace climate change solutions, notwithstanding their profit-maximizing goals. (1) This is a facade. In this note, I account for historical developments amongst major oil companies in the U.S. and in Europe to investigate the true motivations behind their climate related efforts. This will include the companies' growing liabilities under the law, adverse regulations affecting their business, investor expectations shaping their trajectories, and normative pressures from the public. I hypothesize that in time, the weight of climate change will compel countries to enforce environmentally conscious policies to regulate the fossil fuel industry. For a meaningful advancement of greener policies, American and European governments need to adopt conscientious regulations that are independent of corporate influences to support the market-based solutions already initiated by Big Oil. (2)

1. INTRODUCTION

   The topic of climate change is gaining traction in international law, and for good reason. (3) Scientists have crunched massive amounts of empirical data (4) to demonstrate the impending effects of the rise in global temperatures due to intensifying carbon dioxide concentrations. (5) The subsequent melting of polar glaciers is dangerously altering ocean currents, (6) causing extreme weather patterns throughout the world. (7) Given the increased frequency and severity of weather anomalies, the US sustained over $500 billion in losses from 2015-2019. (8) The dangers and exorbitant costs associated with climate change have accelerated the need for global cooperation and legislation in environmental law. While successful rulemaking on climate change has been slow, U.S. and European fossil fuel companies have themselves initiated efforts to combat global warming. (9) Leaders of these megacorporations are now are in the front seats of the climate change debate, governing the conversations around future regulations. (10) However, it may not be logical to have the biggest contributors of global warming be present at the legislative table, mapping out restrictions of their own future." We are inundated with dialogues around "sustainable energy" by the oil and gas industry, concealing their true intentions geared towards minimizing liability associated with continued petroleum production and maintaining a steady demand for fossil fuels. (12) These corporations previously marginalized (13) the effects of rising carbon emissions in an effort to increase oil-dependency (14) and be able to sell petroleum-based products (15)--the leading cause of man-made global warming. (16) Lately, these multinational, profit-maximizing entities (17) have anticipated stricter regulations and a public demand for newer, greener technologies and renewable resources. (18) Faced with the need to balance new environmental costs and growing shareholder pressures shaped by the public's environmental concerns, corporations have realigned their business interests and adjusted their corporate strategy by pledging to greener emissions and long-term sustainability over the decades. (19) In this note, I will summarize the progressions of major oil companies in the U.S. and Europe to chronicle the industry's stance on climate change and account for regional differences between the climate change policies of U.S. and Europe. (20) This gives light to the best ways in which Western governments can foster creation of effective climate change regulations in the decades to follow.

2. DIVERGENCE BETWEEN U.S. AND EUROPEAN OIL AND GAS COMPANIES

   American and European oil companies have diverged in their response to environmental concerns. To exhibit these differences, BP (formerly The British Petroleum Company and BP Amoco, headquartered in London) and Royal Dutch Shell ("Shell," headquartered in the Netherlands and incorporated in the United Kingdom) will serve as exemplars for the European oil industry. Exxon Mobil Corporation (21) ("Exxon," headquartered in Texas) and Chevron Corporation ("Chevron," parent company to Texaco, (22) headquartered in California) will exemplify the American oil industry. Plotting the historical reaction of these companies to environmental legislation, public apprehensions to climate concerns, and other market forces will help elucidate this transatlantic divide.

   1. An Oil Spill as Impetus for Change

      In the 1980s, the U.S. was the first to confront global warming headlines concerning fossil fuel use, dismissed by corporate lobbying efforts. (23) In 1989, the Exxon Valdez oil tanker spilled into the Prince William Sound in southern Alaska, which was considered the worst oil spill in world history at that time. (24) The consequences were prohibitively expensive sparking nationwide distress. (25) The following year, Congress responded by passing the Oil Pollution Act of 1990 regulating the design of U.S. oil tankers and increasing the penalties associated with spills. (26) Given domestic pressures to increase transparency, Exxon and Chevron began to publish their environmental reports to the public. (27)

      Confidential document leaks in 2015 show that Exxon (U.S.) and Shell (Europe) acquired evidence suggesting the causal link between rising temperatures and increased carbon dioxide concentration as a result of fossil fuel use in the 1980s. (28) Both companies had forecasted the consequences of continued C[O.sub.2] emissions, and knew about the "links between their products, global warming, and ecological calamity." (29) This information was withheld from the public in both regions, leaving their respective lawmaking bodies uninformed. Exxon and Shell effectively "lied about climate change. (30) They actively prevented governments from enacting clean-energy policies." (31) It was the Exxon Valdez spill that shed light on the devastating consequences of an oil spill, necessitating laws regulating the oil and gas industry first in the United States in the 1990s. (32)

   2. Shareholders Defining Corporate Goals

      Even though the Exxon Valdez disaster sparked the initial concerns and ensuing laws in the U.S., European corporations were the first to take a proactive stance and issue internal measures to establish "social legitimacy" of their oil business. (33) In the mid-1990s, Shell was involved in major international controversies (34) necessitating publicity of a better social and environmental image. (35) Its regional competitor, BP similarly campaigned for a greener profile. (36) Both companies were pressured by their (European) stockholders who demanded change. (37) In the U.S., despite Exxon showing support for new regulation in light of the oil spill, (38) neither Exxon nor Chevron participated in the early years of corporate rebranding to promote green energy since their shareholders were preoccupied with cost-effectiveness and productivity. (39) Today, Shell and BP stockholders continue to influence decisions to help meet climate goals. (40) On the other hand, American counterparts Exxon and Chevron have resisted renewable energy alternatives and focused on profit-maximizing goals to advance fossil fuel efficiency. (41)

      In recent years, the prevalence of media and its effect on company branding has induced investors to seek and promote eco-friendly alternatives. Faster dissemination of information means that the market reacts differently today than it did three decades ago. (42) For example, the Deepwater Horizon oil spill of 2010 in the Gulf of Mexico debilitated BP's business and corporate image, and had a lasting effect on the company--unlike the Exxon Valdez incident. (43) BP's stock value has had an exponentially more difficult time trying to recoup its value ever since. (44) Following this incident, BP revamped its internal business structure and its shattered public image by diversifying its projects in hope of boosting investor confidence. (45) The Deepwater Horizon disaster shook the oil giant, and forced it to consider environmental and ecological concerns in the years to follow.

      Still today, shareholders in Europe play a more active role in defining corporate goals, and strive to maintain sincerity towards global warming concerns. (46) European oil companies have confirmed plans in place to meet the Paris Agreement's goals to limit the increase in global average temperature to 1.5 degrees Celsius above prc-industrial levels by reducing greenhouse gas emissions to zero in the twenty-first century. (47) Meanwhile, Exxon and Chevron shareholders have only recently voiced their climate concerns, but with little success. (48) In both 2019 and 2020, Exxon and Chevron shareholders sought resolutions "assessing the public health risks of expanding petrochemical operations in areas increasingly prone to climate change-induced storms, flooding, and sea level rise." (49) In May 2020, 46% shareholders at Chevron and 25% at Exxon voted in favor of their respective resolutions on the public health risks associated with expanding the petrochemical business. (50) Despite the votes, Chevron published yet another greenwashed "Climate Lobbying Report," (51) which was soon rejected by its own stockholders. (52) In December 2020, Exxon finally announced a five year plan with "input from shareholders" after consistent underperformance of the stock during the pandemic. (53)

   3. Public Opinion and Social Media Stimulating Change

      While public awareness of the looming risks of global warming can advance lawmaking, the public's responsiveness has been obstructed by deeply polarized views on climate change. Social media has aided pro-environment activism (54) and given rise to the recent children's movement. (55) 2019 Time's Person of the Year, high school student Greta Thunberg, sailed across the Atlantic for the UN Climate Change Conference, where she advocated for the youth, imploring the world's governments to take climate seriously. (56) A catalytic leader...